Liquidity risk is inherent in a bank's core business of maturity transformation. Management of this risk involves identifying and measuring the cash needs of a bank and then satisfying those requirements - in good times and bad. In the wake of severe liquidity difficulties encountered during the financial crisis, regulators have highlighted the importance of liquidity risk management within financial institutions and have reviewed the relevant legislation. This course - the first of two on managing liquidity risk - looks at the issues surrounding the identification of this type of risk and the subsequent measurement of it. A second course will focus on the structures banks put in place to manage this risk, as well as examining the liquidity risk regulatory environment.
Prior to completing this course it is recommended you undertake:
- Interest Rate Risk Management
This online course forms part of the Intuition short course suite.
Learning objectives
- Explain how different forms of banking business generate particular liquidity risks
- Describe how liquidity risks can be measured using gaps and ladders, and how such measurements can be adjusted to incorporate future uncertainty
